AVI files on SAN not getting added to WMC Movie Library

I've just setup an HTPC (W7 Professional 32bit) and am using WMC on Windows 7. I've run into a problem that lots and lots of people have had (can see lots of posts on the web) but not fixes seem to work and I've trolled for two days now finding no fixes for the problem.

Perhaps someone can assist?

Problem: When I add a shared folder from my SAN (which I can access from Windows Explorer), WMC says scanning for files but never finds any. I have a collection of AVI files on the SAN and am wanting to list them in the Movie library on WMC (not the Video Library). I've heard it's a file association problem but that does not seem to fix the problem. I've changed the association of AVIs from WMP to WMC.

Any idea what the real fix is?

Question: What's the best practice to put a collection of AVIs on the WMC. If you have 10 movies, what's best?

1. Create a folder called Movies and under that folder, 10 additional folders for Movie1, Movie2, etc and under those folders the actual AVI files, or,

2. Create one folder called Movies and in that folder stick only the 10 AVI files?

What's the best practice out there?

Folder structure is personal choice. I put my personal home movies by year order, then subfolders such as holiday, kids, christmas, etc. Media centre supports avi without need for any association.
In MC (not windows explorer) go to settings/libraries and under videos add your mapped SAN locations. MC should then see the folders and avi files.